Eric R. Blythe

Eric Blythe is an Associate in the firm’s Boston office. His practice focuses primarily on commercial law and corporate reorganization through representation of debtors, creditors, bond trustees, and bond insurers. Prior to joining the firm, Eric served as legal counsel at the Massachusetts State House. He is the author of more than a dozen articles on bankruptcy and restructuring matters.

In an earlier blog piece we reported on the Third Circuit’s 2015 decision in In re Jevic Holding Corp. where the Court approved a settlement, implemented through a structured dismissal, which allowed junior creditors to receive a distribution prior to senior creditors being paid in full. The decision was appealed and the Supreme Court agreed to hear the case and decide whether structured dismissals are permissible in bankruptcy. More to come…

Today’s U.S. Supreme Court decision in Commonwealth of Puerto Rico v. Franklin California Tax-Free Trustputs an end to one of Puerto Rico’s multi-pronged efforts to deleverage itself. Given the comprehensiveness of the First Circuit’s intermediate appellate opinion upholding the district court’s invalidation of Puerto Rico’s Recovery Act, it was surprising that the highest court took the case, a decision apparently prompted by Justice Sotomayor’s interest in obtaining a reversal. Comments of some other Justices at oral arguments raised the possibility of Sotomayor attracting a majority for the proposition that the preemption provisions of Section 903 of the U.S. Bankruptcy Code were inapplicable to Puerto Rico, but in the end only Justice Ginsburg joined what turned out to be Sotomayor’s dissenting opinion in a 5-2 ruling upholding the relegation of the Recovery Act to the dustbins of history.

As we have written previously, the Recovery Act was damaged goods from the beginning: even if the fairly clear preemption argument had not prevailed, the Contracts Clause constraints on non-federal bankruptcy legislation would have severely constrained, if not eliminated, the effective use of the Recovery Act to break bond contracts. In any event, the Recovery Act, and the Supreme Court’s decision, were a couple weeks away from being moot, as it appears evident that Congress will pass PROMESA, the federal oversight and debt restructuring legislation that has always constituted the logical legal mechanism for those favoring a less chaotic denouement to Puerto Rico’s debt woes.

Price disparities among hospitals pose one of the more intractable issues for policy makers, regulators and the government. That they exist is indisputable. Why they exist is a source of much contention. And the issue creates great disunity within the hospital world, causing fissures especially between academic medical centers and community hospitals.

A draft of the U.S. Treasury’s proposed debt restructuring legislation began circulating earlier today. The draft legislation would give Puerto Rico, as well as other U.S. territories, and their municipalities access to U.S. bankruptcy court under a new chapter of the U.S. Bankruptcy Code (so-called “Super Chapter 9”) as well as making Puerto Rico’s instrumentalities (but not Puerto Rico itself) potentially eligible to file for bankruptcy under existing Chapter 9. The prospects for bipartisan cooperation on some form of such legislation appear somewhat more promising than those for the confirmation of a new Supreme Court justice, but whether this trial balloon will fly remains uncertain.

Mintz Levin was recently honored at the 10th Annual M&A Advisor Awards dinner with the Restructuring Community Impact Award in connection with the Acquisition of Assets of Alsip Acquisition, LLC by Paper Mill Acquisition LLC. Mintz Levin’s Richard Mikels, Kevin Walsh, Charles Azano and Eric Blythe served as debtor counsel during the transaction.

It is a familiar scenario: a company is on the verge of bankruptcy, bound by the terms of a collective bargaining agreement (CBA), and unable to negotiate a new agreement. However, this time, an analysis of this distressed scenario prompted a new question: does it matter if the CBA is already expired, i.e., does the Bankruptcy Code distinguish between a CBA that expires pre-petition versus one that has not lapsed?

It is said that muddy water is best cleared by leaving it be. The Supreme Court’s December 4 decision to review the legality of Puerto Rico’s local bankruptcy law, the Recovery Act, despite a well-reasoned First Circuit Court of Appeals opinion affirming the U.S. District Court in San Juan’s decision voiding the Recovery Act on the grounds that it conflicts with Section 903 of the U.S. Bankruptcy Code, suggests, at a minimum, that at least four of the Justices deemed the questions raised too interesting to let the First Circuit have the last word. This discretionary granting of Puerto Rico’s certiorari petition further muddies the already roiling Puerto Rican waters.

Working for the Queen of Hearts is a tough gig. A disappointing quarter and she’s quick to the chopping block. And the ‘severance’ she offers – “Off with their heads!” – no thanks.

While (non-Wonderland) corporate layoffs are often less animated, former employees receiving severance payments have their own concerns if the company subsequently files for bankruptcy: some or all of those payments may be recouped by the bankruptcy estate. A recent Tenth Circuit decision addressed this issue, finding that a company’s severance payments to its former president and board member were not recoverable, at least not under the particular facts of the case. The Court did, however, highlight potential pitfalls that could lead to an alternate result.

A Delaware bankruptcy court held in In re Ferris Properties, Inc. that the debtors could not sell their property free and clear of the secured lender’s mortgages because the lender would not be paid in full from the proceeds of the sale. Specifically, the Court held that the lender could not be compelled to accept a money satisfaction of its interests under section 363(f)(5), and that the lender did not consent to the sale under section 363(f)(2).

The issue arose when the debtors sought approval of a 363 sale of eleven properties on which Wells Fargo had mortgages. Well Fargo objected to the sale because the sale proceeds would be less than the amounts owed on the properties. The debtors argued that the proposed sale was proper because (1) Wells Fargo could be compelled to accept a money satisfaction of its interests in the properties under section 363(f)(5); and (2) Wells Fargo consented to the sale under section 363(f)(2).

Section 363(f)(5) allows a debtor to sell property of the estate free and clear of liens, claims and encumbrances of an entity’s interest if that entity “could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest.” The debtors and a potential purchaser asserted four separate scenarios under which Wells Fargo could be compelled to accept a money satisfaction of its interest in the properties: (1) under section 1129(b)(2)(A); (2) under section 724(b); (3) through a state law monition sale; and (4) through a state law partition sale. Continue Reading 363 Sale Denied because Secured Creditor not Paid in Full from Proceeds

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